Although each business interruption insurance policy is different, most policies will cover business losses caused directly or indirectly by accidental damage due to a number of insured events. In this blog, we explore business interruption insurance as a result of natural disasters, including floods, bushfires, structural fires and storms.
What is business interruption insurance?
Many businesses have business interruption insurance which pays out money if your business is impacted by an insured event. The money you are paid is usually paid to cover a drop in turnover/profit and for work expenses of the business, but can also cover the costs of replacing business records, merchandise, electronic data and equipment, stock etc.
Business interruption insurance is usually part of your insurance policy covering the business premises, contents, public liability and professional indemnity. You may also be covered for business interruption without realising that the cover is in place.
You may not have to be directly impacted to claim business interruption insurance
Most people think that their business must be directly impacted by a flood or other insured event to be paid benefits. However, this is not always the case.
You may be entitled to a business interruption benefit payment even if your business is only indirectly impacted. For example, you may be able to claim if you live in an area which is impacted by a natural disaster and access to your business is prevented, or important services are cut-off, and this impacts on your business profitability or increases your costs of running the business.
Claiming business interruption insurance for floods
Claims can be made for flood where your business premises is inundated, or access is prevented due to nearby inundation, and your business suffers.
Distinctions between floodwater damage and stormwater damage often arise in business interruption (and other insurance) claims. Many insurance policies do not cover floodwater damage but do cover damage caused by stormwater run-off. The distinction is not always straightforward.
Difference between floodwater and stormwater run-off
If you are not covered for flood damage, the insurer might decide that the water which entered your property was water which has escaped from a watercourse (eg. a river) and was not due to stormwater run-off. The insurer will often rely on generic hydrological evidence to support its position.
However, you can often challenge this decision by using eyewitness or photo/video evidence to prove that the water which first entered your property:
- was clear and, therefore, not from a river; or
- arrived prior to the local watercourse(s) breaching their banks; or
- came from a different direction to the relevant river/creek or other watercourse.
Claiming business interruption insurance for fire/bushfires
It is common for business interruption insurance policies to provide cover for disruptions caused by fire or bushfire. These claims are usually straightforward when the business premises is damaged.
However, it’s important to note that where access is prevented due to Government orders in response to bushfires (eg. prescribed road closures), the distance between your business premises and the bushfire can be important.
Seek legal advice if your business interruption claim is being denied.
Claiming business interruption insurance for storms
In addition to claims for inundation and claims relevant to direct damage to your business premises, claims can be made for utility supply interruption caused by storm damage (ie to power lines) or prevented access due to associated Government access orders.
How much cover does business interruption insurance provide?
Business interruption insurance claims for loss of turnover or profit could be worth $1,000,000 (or more).
To make a claim, you must show that an insured event has happened and caused the damage that is claimed; eg, loss of turnover or profit or increased costs of doing business.
As discussed above, the damage can usually be caused directly by the insured event or indirectly; for example, due to restricted access or utility supply issues.
Does your business insurance policy include business interruption cover?
Thousands of businesses are covered under their business interruption insurance for natural disasters but don’t know it. This may include claims for floods, stormwater run-off and bushfires, and associated government closures or restrictions of access (when your street or town is closed because it is unsafe).
We understand that many businesses may have been told by their insurer or broker that they have no claim due to exclusions. This is not always true, and it's worth getting a second opinion and from us, that second opinion is free.
Free insurance cover check
We will check your policies for free & tell you what you can claim.
We will also act for you on your insurance claims and appeals, no win/no fee. We help businesses all over Australia.
Speak with an insurance lawyer about your business interruption insurance
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